|16 February, 2020

BRI: UAE developers bet big on Chinese buyers

The UAE’s emergence as a regional hub for Belt and Road has put the country on the destination map of Chinese real estate investors

Image used for illustrative purpose. Dubai skyline and architecture modern and fast growth of a business city.

Image used for illustrative purpose. Dubai skyline and architecture modern and fast growth of a business city.

Gettyimages

The UAE's emergence as a regional hub for Belt and Road has put the country on the destination map of Chinese real estate investors.

Chinese appetite for real estate investments in the UAE is expected to continue to rise in 2020, with Abu Dhabi set to join Dubai in attracting new buyers following the UAE capital opening up the freehold property ownership to foreigners.

The second biggest economy in the Middle East is the eighth most popular country in the world for Chinese buyers as ranked by the number of real estate buying enquiries by the Chinese, according to Juwai IQI that runs China's leading international property website juwai.com.

"Chinese buyer enquiries hit a peak in the first quarter of 2019. Since then, the demand has declined, although it remains at nearly triple the average level of 2018," said Juwai IQI Executive Chairman Georg Chmiel.

"In 2018, Chinese buyers acquired an estimated $617.07 million worth of residential real estate in Dubai. We don't think the boom is over yet, and we expect Chinese buyer inquiries to grow further in 2020," he said and added that Chinese residential investment in the Gulf and especially in the UAE grew in 2019.

David Ji, Head of Research & Consultancy, Greater China at Knight Frank, pointed out that Chinese investors' targets are very diverse and careful these days as "the country is curbing rampant trophy asset buying."

"Middle Eastern countries offer natural resources as well as financial market potential, attracting buyers from China. However, they are still feeling the market out and being open-minded in terms of investment targets," he said.

Developments in the UAE have attracted Chinese property investors. This was evident during the 20th Luxury Property Show in Shanghai in December 2019, when the Dubai Land Department received around 10,000 enquiries from Chinese investors.

Imran Hussain, Head of Residential Valuation at Colliers International MENA, said there had been significant interest from Chinese investors over the past few years in particular within a few developments, such as Motor City, the Greens, and Jumeirah Lake Towers.

"We are noticing a further growth in confidence for the Dubai property market from Chinese nationals as interest from this segment is more pronounced throughout Dubai rather than in just a few developments," he said.

VALUABLE SEGMENT

Chinese buyers are seen as a valuable segment of the investment and end-user market. Many brokerage firms and other property-related service providers are employing Chinese nationals to service this segment.

Chinese brokerage firm Fidu Properties, for instance, opened its first regional office in Dubai in 2018, followed by the second office in October last, to cash in on the growing Chinese interest in UAE's property market.

Nazish Khan, COO of Fidu Properties, said the UAE has several luxurious sightings and investments to offer across a range of individual specifications and budgets.

"Going by the responses over the past couple of months, it can be presumed that this trend will continue in 2020 also," he said.

ABU DHABI, A NEW FRONTIER

A significant change the market is expecting this year is the emergence of Abu Dhabi, the UAE's capital, as a destination for Chinese buyers, given that freehold ownership is now possible, said Chmiel.

"Abu Dhabi has great potential as an exciting market for Chinese buyers. Growth in demand could be very rapid," he said, adding that developers will need to bring the right kind of products onto the market, and some regulatory issues still need to be sorted out.

"We are watching anxiously to see what moves the industry and regulators in Abu Dhabi make to attract Chinese buyers. It's potentially a very appealing market for our investors," he said.

KEY DRIVERS

Industry experts say that UAE's strengthening socio-political and trade relations with China has played a part in boosting Chinese investment into the emirate's real estate sector.

"The UAE being the key component of BRI and strategic ties between the two nations have given renewed confidence to two-way investments," said Alan James Gammon, general manager at Samana Group, which expects to attract $1 billion worth of investments from China in the next five years.

The Dubai-based developer announced last October that it would be launching three new real estate projects till the first quarter of 2020, with the first China office set to come by March-April 2020.

"These developments [BRI and bilateral trade] and Expo 2020 have given us enough reasons to go aggressive and promote our property and investment services in the Chinese market," he said.

Industry players say the rise of preferential UAE policies for the Chinese has been playing an indirect role in boosting and attracting Chinese investors and buyers.

This has helped even young companies like Fidu Properties to grow fast over the past year.

"We aim to grow at a constant rate of 10 percent every year in order to reach our goal and become number one on all levels. The response so far has been overwhelming," said Khan, adding that greater than 50 percent proportion rate comes from the Chinese investors.

For greater sustainability and transparency, Dubai's Real Estate Regulatory Agency (RERA) in November 2019 issued a law that stipulates the developers will no longer collect service charges from investors for the upkeep of the properties. "It gives yet another benefit to investors, along with higher yields," he said.

MARKET STRATEGY

To capitalise on the growing Chinese interest in the UAE, local brokerages like fam Properties are focusing on a Business-to-Business (B2B) strategy. "The response has been good so far," said Firas Al Msaddi, CEO, fam Properties, and fam Living.

He said it is a very competitive market as the Chinese have access to other real estate markets in Japan, Vietnam, and Thailand.

The company is aiming to generate 25 percent of its revenue from the Chinese market over the next three years.

UAE companies are adopting various means, including hosting roadshows in the main Chinese cities to promote Dubai and their products.

Samana, which recently held roadshows in Shanghai, Beijing, and Guangzhou cities, said it witnessed a high level of interest from the Chinese in opening a business in the UAE.

"Chinese buyers are a key market for us across our range of businesses. We anticipate bi-monthly visits to China to promote products and services," said Gammon.

The company envisages 70 percent of sales for its latest project, Samana Golf Avenue will come from the Chinese market.

Other Dubai-based developers are also seeing a spike in demand from Chinese buyers. For instance, Sobha Realty last year opened a sales office in Shanghai as it recorded 200 percent growth in Chinese investors for its Sobha Hartland project in the first two months of 2019, with over 36 percent of buyers for the project from China.

Dubai-based Ellington Properties, too, is looking at China seriously and has already signed a partnership with Beike, China's leading open platform real estate listings portal, which will take its properties to potential investors in over 300 cities in the country.

Binghatti Developers is looking to tap into the Chinese market, with the opening of a new office in Hong Kong.

PROPERTY TYPES

Fidu Properties says Chinese investors are interested in mainly ready and off-plan properties. "While considering such properties, they tend to centrally narrow down the factors to location, annual yield, and selling prices," said Khan.

Downtown Dubai, Greens, and the International City fulfill these requirements and a predominance of Chinese investors and communities can be witnessed here.

While Fidu Properties doesn't customise its offerings as its central aim is to promote the listings and attract buyers, Khan said they do hand out special prices and packages for the Chinese investors and buyers.

Gammon says Chinese investors prefer ready properties, and the Samana Greens project fits the bill. "Chinese are also very interested in the residency programmes in Dubai and the UAE, which they can secure through property investment."

According to fam Properties, Chinese are generally interested in income/rental generating units, with a price range averaging 1 million to 1.5 million UAE dirhams ($272,242 to $408,363) per unit.

In terms of offering attractive deals, Al Msaddi said they are working with one property developer to create a guaranteed income scheme for Chinese investors. "We also offer a lot of educational and logistic support to our Chinese investors," he added.

Chmiel said apart from retail investors, Chinese institutional buyers too can be tapped. However, "they tend to work through partnerships with local developers," he explained.

"They have resources available to them that the average retail buyer does not. Chinese buyers tend to like water views, convenient access to transportation and amenities, and luxury finishes and services."

(Reporting by Syed Ameen Kader; Editing by Anoop Menon and Bhaskar Raj)

(anoop.menon@refinitiv.com)

(This article was first published in the 3rd edition of BRI CONNECT: AN INITIATIVE IN NUMBERS by Refinitiv. )

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© ZAWYA 2020

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